Will the Baking Soda King Shine in Its Fourth-Quarter Report?

2013 was a strong year for Church & Dwight (CHD 0.23%) and its stock performed accordingly by rising 25.8% with the inclusion of $1.12 in dividends paid. This rally could continue throughout 2014 if the company can deliver in its earnings reports, and it will release the first in just a few days. Let's take a look at what Church & Dwight accomplished in its most recent report and what it expects for the upcoming quarter, and see if this is our time to buy Church & Dwight or if we should sit on the sidelines for now.

The baking soda leader                                                                                                              Church & Dwight manufactures and markets personal care, household, and specialty products worldwide. Its most popular brands include Arm & Hammer, Trojan, First Response, Nair, Oxi Clean, and Orajel. Church & Dwight is also the leading producer of baking soda in the United States, which is sold in retail packaging and also paired with other specialty chemicals for industrial, institutional, medical, and food applications.

Last time out                                                                                                                                On Nov. 1, Church & Dwight released third-quarter results for fiscal 2013. The results were mixed compared to analyst estimates and looked like this:

Earnings per share increased 15.2% and revenue rose 11%, driven by strength in the Arm & Hammer and Trojan brands. Gross profit rose 11.5% to $365.2 million as the gross margin expanded 20 basis points to 45.4%, marking the fifth consecutive quarter of margin improvement. Church & Dwight's CEO, James Craigie, stated:

Our innovative new products have received strong distribution support from retailers and will continue to be supported by increased marketing spending with the expectation to deliver strong organic sales and share growth on both our value-oriented and premium priced products.

I believe Church & Dwight's increased marketing will allow the better-than-expected strength in new products to carry over into the fourth quarter and this will be a key driver in 2014.

Expectations & what to watch for                                                                                              Fourth-quarter results are due out before the market opens on Feb. 4 and the current expectations call for growth on both the top and bottom lines. Here's an overview of those expectations:

These estimates call for earnings per share to increase 15.8% and revenue to grow 1.7% from the same period a year ago. The revenue estimate for the third quarter seemed much too high so the miss was warranted, but I believe the estimate for the fourth quarter is much too low. With this said, I believe Church & Dwight could easily meet or beat both estimates, with core brands like Arm & Hammer and Trojan leading the way once again.

Other than the key metrics, it will be important for Church & Dwight to provide an outlook for 2014 that is within or above Wall Street's estimates. Currently, analysts expect Church & Dwight's 2014 earnings to be in the range of $2.77-$2.81 per share on revenue of about $3.2 billion. Also, I would like to see the gross margin expand for the sixth consecutive quarter, reflecting continued success in the productivity programs and lower commodity costs. If the company can deliver on earnings, provide solid outlook, and expand its margin, I believe it could raise its quarterly dividend by 14.3% to $0.32 and continue rising to fresh all-time highs throughout 2014.

Competitors' results due out as well

Colgate-Palmolive (CL 0.67%), one of Church & Dwight's largest competitors in the personal products industry, is also set to report earnings shortly. It is home to some of the world's most popular brands such as Colgate, Palmolive, Speed Stick, Softsoap, Irish Spring, Protex, and Hill's Pet Nutrition. Colgate's fourth-quarter results are due out before the market opens on Jan. 30 and the estimates call for growth on the top and bottom lines. Here's an overview of those estimates:

These expectations would result in earnings per share increasing 6.4% and revenue growing 2.7% year-over-year. For a company with a 45% global market share in toothpaste, I believe these estimates will easily be met, if not surpassed. Colgate, like Church & Dwight, is trading right around its 52-week high so I would wait for weakness before considering it for an investment. With this said, investors can take their pick of Colgate or Church & Dwight because both have strong upside potential, paired with healthy dividends.

The Foolish bottom line                                                                                                              Church & Dwight is a great American company that has been building wealth since 1846. It is about to report fourth-quarter earnings and I believe the current expectations are attainable, but it will also be important to watch for its 2014 outlook, margin expansion, and the possibility of an increased dividend. Keep an eye on Church & Dwight and its competitor, Colgate-Palmolive, and consider buying either on any significant pullback.